The Global Economic Barometers maintain their upward tendencies that began in May, after historic lows in April. The Coincident Barometer has reduced its upward pace and still reflects economic activity levels well below those before the Covid-19 pandemic. The Leading Barometer, on the other hand, reaches its highest level since 2010, signalling continued optimism regarding upcoming world GDP developments. Given the high levels of uncertainty, this should be interpreted with caution.
The Coincident Global Barometer records a rise of 4.5 points in September, increasing from 80.5 to 85.0 points. The Leading Global Barometer, meanwhile, rises 5.7 points this month, from 110.2 to 115.9 points. Albeit at a slower pace than before, both barometers have been rising for fourth months in a row now. Although all three regions investigated contribute positively to the movement of the Coincident Barometer, the Asia, Pacific and Africa region is taking the lead. In the Leading Barometer, the increase was influenced by Europe and the Western Hemisphere, while the Asia, Pacific and Africa region returned to contributing (slightly) negatively. The difference of 30.9 points between the two Barometers is the highest recorded in history, i.e. since 1991. This demonstrates the optimism regarding the future economic recovery relative to the current situation.
“The performance of the Coincident Barometer in recent months is characteristic of a recovery, the result of which will be growth in the level of activities across all sectors and regions in the third quarter. This rebound will reverse part of the historic losses of the second quarter, with greater intensity than previously anticipated. While the Leading Barometer signals expectation of continuity in the trajectory of the recovery, three important points continue to impose uncertainty regarding its intensity. Firstly, the
Leading Barometer itself is yet to show signs of equally consistent recovery between sectors. Secondly, the positively surprising results of recent months benefitted from the essential contribution of the different stimulus measures adopted around the world, there being limits to the continuity of these measures. Finally, there is still no clear outlook for effective control of the health crisis”, evaluates Paulo Picchetti, researcher of FGV IBRE.
Coincident Barometer – regions and sectors
The Asia, Pacific and Africa region accounts for 61% of the growth in the Coincident Barometer in September, contributing 2.8 points to the rise of 4.5 points. The Europe and the Western Hemisphere (North America, Latin America and the Caribbean) regions both contribute 0.9 points to the global indicator. The Western Hemisphere is the first to return to its level of February 2020. The graph below illustrates the contribution of each region to the deviation of the Coincident Barometer from the historical average of 100 points.
The highest contribution to the increase in the Coincident Global Barometer once again comes from Industry follow by Trade. The set of variables reflecting the aggregated evolution of economies (Overall Economic Development), which is usually more influential, comes in third place. Services and Construction continue to contribute modestly to the result, with the latter exerting a negative influence.
Leading Barometer – regions and sectors
The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In September, Europe contributes 6.2 points to the 5.7 points rise in the global indicator, in comparison with a stronger increase of 28.7 points in its Coincident Barometer. The Western Hemisphere indicator makes a slight, positive contribution, while Asia, Pacific and Africa falls, partly compensates the increase recorded in the other regions. This last region is the only one in which the leading indicator is yet to recover the losses that occurred between March and May of this year.
All sector indicators contribute positively to the result of the Leading Barometer, except for Construction. The Industry sector contributed more than 3.0 points and the set of variables reflecting the aggregated evolution of economies (Overall Economic Development) and the Services sector added a little over 1.0 point each. The remaining sectors contributed less significantly to the increase in the global leading indicator.